China’s SouFun Surges After $125 Million U.S. IPO

Sept. 17 (Bloomberg) -- SouFun Holdings Ltd., the operator
of China’s biggest property website, posted the second-largest
first-day gain for a U.S. initial public offering this year
after raising $125 million selling shares at the top of its
price range.

The company that controls almost half of China’s online
real-estate advertising market surged 73 percent, or $31, to
$73.50 in New York Stock Exchange trading after selling 2.93
million American depositary receipts at $42.50. At the midpoint
price, SouFun was valued at 14.3 times earnings, 14 percent less
than the average of six Internet portals and property
information providers, data compiled by Independent
International Investment Research Plc and Bloomberg show.

The offering came after the number of Internet users in
China, the world’s fastest growing major economy, surpassed the
entire U.S. population. The IPO was the first of at least 11
scheduled in the U.S. this month after the Standard & Poor’s 500
Index rebounded 10 percent from its 2010 low in July.

“People are flocking to IPO issues that they think are
interesting and colorful and price at the top end,” said Josef
Schuster, the Chicago-based founder of IPOX Capital Management
LLC, which oversees $3 billion. “It’s a very positive beginning
for a new IPO cycle.” Schuster bought shares of SouFun, whose
Chinese name means “housing search.”

Telstra, Private Equity

Telstra Corp., Australia’s largest telephone company and
the owner of 50.5 percent of SouFun’s shares, had planned to
sell its entire stake in the company to IPO investors and other
buyers, according to the SEC filing. Melbourne-based Telstra
paid $254 million for 40.73 million shares in 2006, and the
IPO’s price valued Telstra’s current stake of 40.75 million
ordinary shares, equivalent to 10.19 million ADRs, at about $433
million, data compiled by Bloomberg show.

Private-equity firms General Atlantic LLC of Greenwich,
Connecticut, and London-based Apax Partners each planned to buy
15.3 million shares from Telstra, giving them both 19 percent
stakes in SouFun following the offering, the filing showed.

Deutsche Bank AG of Frankfurt and New York-based Goldman
Sachs Group Inc. were hired by SouFun to lead the offering.

Relative Value

SouFun’s valuation of 14.3 times next year’s earnings
compared with 22.8 times for Shenzhen, China-based Tencent
Holdings Ltd., China’s biggest Internet company by market value,
and LoopNet Inc., the San Francisco-based operator of a real
estate marketing website, according to Independent Investment
Research in London.

China had an estimated 420 million Internet users at the
end of June, an increase of 36 million from six months earlier,
according to data from the government-sponsored China Internet
Network Information Center. The U.S. population is about 310
million, according to the Census Bureau’s website, while about
231 million Americans have access to the Internet, according to
the Washington-based World Bank.

The value of August property sales in China rose about 15
percent from July, and prices jumped 9.3 percent from a year
earlier, the government’s statistics bureau said on Sept. 10.
Chinese officials have imposed measures such as banning loans
and raising mortgage rates and down-payment requirements for
purchases of extra homes to curb speculation. They may extend
crackdowns, New York-based Citigroup Inc. said this month.

Postponed IPOs

SouFun’s IPO was the first in the U.S. excluding closed-end
funds since Houston-based Whitestone REIT raised $26.4 million
on Aug. 25. At least 43 companies withdrew or postponed
offerings this year amid growing signs that the American
economy’s recovery from the longest recession since World War II
was deteriorating.

At least three other Chinese companies are scheduled to
price U.S. IPOs this month, data compiled by Bloomberg show.

China Ming Yang Wind Power Group Ltd., the Zhongshan,
China-based maker of wind turbines; Country Style Cooking
Restaurant Chain Co., the Chongqing, China-based operator of
about 100 fast-food locations in China; and ChinaCache
International Holdings Ltd., the Beijing-based provider of
Internet content to businesses and government agencies, are
seeking to raise a combined $536 million, Bloomberg data show.

Chinese companies and Gurgaon, India-based MakeMyTrip
account for four of the five best-performing IPOs in the U.S.
this year, data compiled by Bloomberg show.

“China’s the largest Internet market, and it’s growing in
affluence, which means you’re going to have more people
accessing the Internet,” said Michael Yoshikami, who oversees
about $1 billion at YCMNet Advisors in Walnut Creek, California.
“Anything that has Internet, China and IPO in it will be
strongly appealing to investors.”